# Questions tagged [microeconomics]

Microeconomics is a branch of economics that studies the market behavior of individual actors (usually firms and consumers) and the aggregation of their actions in different institutional frameworks (usually the market).

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### Understanding Classical Rationality at a Basic Level

I am a high school student in an intro Microeconomics class (note that we have not covered utility functions) and I'm utterly confused about the classical concept of rationality. I certainly ...
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### Proving existence of utility function

In Advanced Microeconomic theory by Jehle and Reny there is a proof of the theorem which states the existence of utility function. In order to prove the existence of a utility function $u(\mathbf{x})$...
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### What are the most used approximations in economics?

As I progress in my self-study, I'm tired of having to search for several different approximations techniques used in economic textbooks. Sometimes the authors don't even tell the reader they are ...
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### Is MRS supposed to have a minus sign or not? What's there to say about convexity of preferences?

If we have a utility function $U(x_1, x_2) = x_1(x_2+1)^2$ of some consumer, then $$MRS_{x_1, x_2} = \frac{\color{red}{-}(x_2+1)}{2x_1}$$ Some books have a $\color{red}{-}$. Others and Wiki don't ...
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### Does a Robinson Crusoe economy have a substitution effect and an income effect?

Consider a Robinson Crusoe economy. Let $c$ be consumption and let $l$ be leisure. Our utility function is defined as $$U(c,l)$$ Geometrically, I think we can say his indifference curve should be ...
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### What is an equilibrium generated by replication?

Sorry this might be a little too rudimentary for you, but I'm not an Econ background. When I was doing exercises for MGW chapter 17 "Positive Existence of Equilibrium" I came across the following ...
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### Instrumental variables for minimum wage

I was wondering if there is a classic instrument for minimum wage as there is for schooling or other variables. If so, how does it fares with respect to most established designs like spatial ...
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### If all firms in an economy are in monopolistic competition with constant elasticity of substitution, can they profit-maximize at $MC=MR=AC$?

Suppose all firms are monopolistically competitive with constant elasticity of substitution. Can they profit maximize at the quantity point $MC=AC$ (So $P \neq MC$ but $Q$ is set at where $MC=MR=AC$ ...
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### Teaching: from Microeconomics to Open-economy macro

I am a new faculty teaching MBA courses. Presently, I am teaching International Financial Management (IFM) and Macroeconomics. I have prepared the syllabus of macroeconomics based on first 9 chapters ...
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### What are good books on economic world history?

I am trying to find a book that covers human history with a special focus on economics. It should answer questions like: What economic systems prevailed during which eras? How did these systems work ...
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### How, with complete markets, do we have a representative agent?

I've read several texts stating that with a complete market assumption, there's always a representative agent lurking. How is it that by assuming complete markets, we're able to prove the existence of ...
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### Multidimensional screening and convexity of the surplus/rent function

I'm starting to read the literature of multidimensional screening models for monopolists selling $n$ goods to a continuum of buyers with $m=n$ dimensional types, and Rochet (1987) proves that a ...
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The inter temporal elasticity of substitution between two periods of time is $$\sigma=-\frac{d[\ln(c(s)/c(t))]}{d[\ln(U'(c(s))/U'(c(t)))]}$$ I need to prove that $$\lim_{s \to t}\sigma = -\frac{U'(c(t)... 1answer 2k views ### Stone-Geary utility function, derivation of Marshallian demand I am reading a paper on structural change. It has three sectors and it features non homothetic utility function, namely a CES with some thresholds for the consumption of the three goods. The UMP is as ... 1answer 77 views ### Do assets without rental income streams appreciate relative to assets with rental income streams? In his book "The Armchair Economist", economist Steve Landsburg critiques an op-ed concerning the relative value of stocks and real estate: James K. Glassman wrote a piece in The New Republic to ... 1answer 2k views ### why is real wage divided by marginal product of labor often called real marginal cost? As said in the title, why is real wage divided by marginal product of labor often called real marginal cost? In mathematical formula, mc_t = (W_t/P_t)/MPN_t where MPN_t refers to marginal product ... 0answers 51 views ### Why do two-sided marketplaces often charge both sides of the transaction? Why do marketplace apps often charge both sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler? i.e. if the marketplace knows which side of the market ... 0answers 100 views ### Topological intuition to continuous preference relation For a Microeconomics Course, we are going through MWG, and in the lecture we discussed the notion of a continuous preference relation. A preference relation \succsim on a set X is called ... 0answers 99 views ### utility maximization with nested CobbāDouglasāCES preferences I'm trying to understand the following paper: Hsieh & Ossa: A global view of productivity growth in China (2016). The pdf can be found here: https://faculty.chicagobooth.edu/chang-tai.hsieh/... 0answers 71 views ### Signalling Model (How to solve a differential equation?) I'm currently reading "SAVING RATES AND POVERTY: THE ROLE OF CONSPICUOUS CONSUMPTION AND HUMAN CAPITAL" by Omer Moav and Zvika Neeman, and I encounter some problem deriving one of the equations. ... 1answer 132 views ### Allocative efficiency — correlation between MB and p in populace with wealth inequality I was reading a paragraph in an economics textbook that was talking about resource allocation, and felt that it missed an important point, leading to a conclusion that I disagreed with. I was hoping ... 1answer 136 views ### Utility Representation of Lotteries We went over a lemma in class leading up to a larger theorem. The Lemma states: Let \succeq be a rational preference relation on \mathscr{L} and let \succeq admit utility representation under ... 0answers 207 views ### How do supply chains form? I am trying to put forth a theory for endogenous supply chain formation. A set of K complementary tasks need to be performed to manufacture a good G. If manufactured, there exists a demand ... 4answers 2k views ### Books for microeconomics and macroeconomics for selected topics I am a mathematics undergraduate trying to self-learn some economics. I have no background in economics. I wish to know from which chapters of Hal Varian's "Intermediate Microeconomics" (7th edition) ... 3answers 1k views ### A few clarifications on Utility equations and indifference curves? I have the utility equation U(a,b) = a^{2}b^{3} How can I tell if the indifference curves are convex? I was under the impression that if: U_{a} > 0 and U_{b} < 0 then the curve would ... 2answers 2k views ### Why is marginal cost not the cost of producing the last unit? I am slightly confused about this wikipedia article. en.wikipedia.org/wiki/Marginal_cost It states that marginal cost is not the cost of producing the next or last unit. Why is this the case? I ... 4answers 11k views ### Why are elasticities defined as logarithmic derivatives? In my economics class, we often compute the elasticity of Y with respect to X,$$\eta = \frac{\partial \log Y}{\partial \log X}.$$You can compute this from the slope of a line fit to a log-log ... 3answers 4k views ### Is my logic on taxation for this question legit? At Fenway Park, home of the Boston Red Sox, seating is limited to 39,000. Hence, the number of tickets issued is fixed at that figure. Seeing a golden opportunity to raise revenue, the City of Boston ... 2answers 846 views ### Math basics for Macro&Micro economics and econometrics I have just been admitted to a graduate school for studies in economics and I major in public administration during my undergraduate time. I have learnt linear algebra, single variable calculus, ... 2answers 3k views ### Variable cost as the sum of marginal cost We learned in class that variable cost is the sum of marginal cost. I am given the following question. Assume you are a profit-maximizing firm in a perfectly competitive market. Marginal cost is MC(... 2answers 1k views ### Existence of solution to maximization problem I'm a first year grad student and we're learning about the utility maximization problem and the producer's problem now. We have been assuming that a solution to these problems exists. But every now ... 3answers 483 views ### Literature Recommendation: Advanced Undergraduate Economics I come from a strong quantitative background and am going to law school in the fall. I'm interested in financial product regulation and competition law. I have taken an introductory course in ... 3answers 786 views ### Why labour, capital, and output levels cannot be pinned down in perfect competition? Consider a firm producing with the following technology: $$Y = AL^{\alpha}K^{\beta}$$ Assuming that factors are paid their marginal contribution to output, it can be ... 2answers 1k views ### Is the Cobb-Douglas Utility Function Locally Non-Satiated at (0,0)? My understanding of local non-satiation is that increasing your allocation of one good by a marginal amount increases utility. Suppose your utility takes the following form:$$U(x,y)=x^\alpha y^\beta$$... 2answers 1k views ### Risk Premium in the Expected Utility Theory Consider an agent with utility function u, initial wealth \omega, and a random variable x. By definition of the risk premium R, we have$$ Eu(w+x) = u(w+E(x)-R).  The classical derivation ...
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Source: Question 9b, p 61, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 8b in Principles of Microeconomics, 4 Ed, 2008 9. Are the following statements true or false? ...
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### Notation conventions for superscripts and subscripts

I want to establish a consistent notation in my work, however, I struggle with the correct notation when more than one condition is present. First, I am wondering what to put in the superscripts and ...
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### General model of economics, economics as mathematical structure

Contrary to the common view, the physics is all about models, there are no such thing as law of nature, because every physical law has its applicability range and therefore all of laws as models. But ...
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